FAST FIVE: Could China Dump Its US Treasuries? A Contrarian View Emerges From Beijing

Published by on May 23, 2019

In addition, even if it did cause market volatility, China's remaining holdings would also be hurt, which the Chinese may view as a move that is too risky, US sceptics have said.

﻿”While we think China will continue to sell Treasuries, as it has for most of the last year, we do not think that the pace at which they sell will increase as a direct response measure for tariffs.

However, one line of thinking is that because the trade war could remove the US as a viable market for Chinese exports, a strengthening yuan against the dollar – which would make Chinese goods more expensive for American buyers – may be seen as an acceptable outcome by Chinese policymakers.

“Massive amounts of continuous selling of US debt will raise suspicion among professional traders that there is a major seller in the market, which could be China,” said Jasper Lo, chief investment strategies at Eddid Securities and Futures.

China's play could also draw the wrath of other large bond holders, such as Japan and the European Union.

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